When you were checking your mailbox, did you receive a letter from your bank with a credit card included in it? If yes, then you just got yourself a pre-approved credit card. While it is tempting to make your first swipe with your new credit card, you might want to ask some questions first and know more about pre-approved credit cards.
What does it mean when your card is pre-approved?
In other countries, being “pre-approved” means that banks already did a basic credit investigation on your finances and deemed that you have a high chance of getting approved for one of their credit cards. While they think that you are eligible and financially healthy to own a credit card, you still have to go through the process of application just like anyone else.
However, pre-approved credit cards in the Philippines are a different story. Unlike in other countries, Philippine banks entirely eliminate the application process. They will reach out to you—usually via phone or mail—and say that you’ve been pre-approved for a credit line. Upon receiving your pre-approved credit card, you can start using your card by simply activating it through their hotline.
What is the catch with pre-approved credit cards?
Fortunately, there are no hidden fees or fine print clauses in your contract. With pre-approved cards, you are just the same as other cardholders; the same policies apply to all types of cardholders, including you. However, the only catch with pre-approved credit cards is the temptation of using a credit card even if you don’t have to.
For instance, a person owning a few credit cards will have the tendency to go overboard with his loans because of having a new credit card. With a new spending capability in hand, a person can plunge himself to a downward spiral of debt because he couldn’t keep up with his balance. While debt is solely the responsibility of the cardholder, it could’ve been avoided in the first place if there is no temptation present in the form of pre-approved credit cards.
What should you do when you already have a pre-approved credit card?
In 2010, the Bangko Sentral ng Pilipinas (BSP) already clamped down on a different financial institution in terms of credit cards, prohibiting them from issuing pre-approved credit cards to individuals under the BSP Circular 702. According to the central bank, a credit card is considered pre-approved if a person did not apply for a card yet he received a credit card from a certain bank. The aim of the memorandum is for banks and other financial institutions become more rigorous in accepting credit card applicants by looking at their credit history and financial capability to settle loans.
Last month, BSP releasing another memorandum that reiterates the ban on issuing pre-approved credit cards, including other actions considered equivalent to the issuance of the said types of cards such as unsolicited phone calls saying that a person already has a credit card waiting for pickup. While the circular has been in effect since 2010, banks argued that the issuance of the cards in question is part of their loyalty program.
If you received a credit card via email or received a phone call saying that a credit card is waiting for you, consider doing the following actions:
• Do not use or activate the credit card. Since you did not apply for it, there is no need for you to use the pre-approved credit card. Remember, financial mismanagement starts with the use of money you never have.
• Decline their offer and ask them to not include you in their promos again. By simply saying no, you are saving yourself from tons of trouble that awaits you when you accept their card. Furthermore, you can opt out of their promos and other solicitations with one phone call.
• Report them to the BSP’s Financial Consumer Affairs Group. Since the issuance is unsolicited credit cards is a violation, you can report such actions to the BSP’s Financial Consumer Affairs Group. You can call them at 708-7087 or send an email at consumeraffairs@BSP.gov.ph with the details of your complaint.
Remember: as a customer, you have the right to say no to products and services that you did not ask for—and that includes pre-approved credit cards.